It's Baaack! Obama's Minimum Wage Folly

When President Obama announced a proposed hike in the federal minimum wage rate in his State of the Union address last week, the reaction was swift. House Speaker John Boehner spoke for most Republicans in condemning the increase (from the current $7.25 an hour to $9.00), reminding his colleagues that “when you raise the price of employment, guess what happens? You get less of it.”

When President Obama announced a proposed hike in the federal minimum wage rate in his State of the Union address last week, the reaction was swift. House Speaker John Boehner spoke for most Republicans in condemning the increase (from the current $7.25 an hour to $9.00), reminding his colleagues that “when you raise the price of employment, guess what happens? You get less of it.” Added Boehner, “What happens when you take away the first couple of rungs on the economic ladder? You make it harder for people to get on the ladder. Our goal is to get people on the ladder, and help them climb that ladder so they can live the American dream.”

Tough words, considering that America has had federal minimum wage laws for 74 years, and the minimum wage has been hiked 22 times since its inception, most recently in 2009. Nineteen states plus the District of Columbia already have minimum wages exceeding the federal rate, and the first state to enact a minimum wage law was Massachusetts, in 1912. Yet more than a century later, the minimum wage continues to be a bone of contention among politicians, and a source of dispute among economists.

President Obama made no secret of his views on the minimum wage. “No one who works full time should have to live in poverty,” the president told his State of the Union audience.

Many Republicans and business leaders are unimpressed. As William Dunkelberg, chief economist for the National Federation of Independent Business, pointed out, “The higher the price of anything, the less that will be taken, and this includes labor. Raising the cost of labor raises the incentive for employers to find ways to use less labor.”

The minimum wage, in other words, is no different than any kind of price control: In seeking to impose controls on the price of labor, government invariably creates a shortage of same. The allegedly pro-free market Republican Party professes to understand this.

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